This is a slightly longer version of the editorial I published in the Financial Times today, Americans Need To Leave Deadbeats Behind, here, with my husband, Nicholas Christakis:

Most Americans aspire to home ownership in part because it gives them a sense of rootedness. American government policies support this objective, including the cherished deductability of mortgage interest. The USA has one of the higher home ownership rates in the world, and people assume owning a home fosters responsibility and a sense of community, and that it is good for our society.

But there are downsides to owning a house that go far beyond getting stuck – as many Americans still are – with a house worth less than its mortgage. Indeed, being rooted to a house can actually harm communities and individuals by making it hard for homeowners to pick up and move when a neighborhood starts to deteriorate. This strikes at the heart of the American dream – but it’s true.

To understand why, we must return to two questions that have puzzled social scientists, biologists and philosophers for centuries. First, why, in the face of overwhelming reasons for selfishness, are humans fundamentally altruistic and cooperative? Second, how do groups stay cooperative when confronted by people in their midst who don’t want to cooperate?

A simple answer to both questions comes from a strategy widely known as “tit-for-tat”, a technical term given to a strategy famously described by Anatol Rapoport in 1980. Applied to a residential community, it goes something like this: If you shovel my snow-blanketed driveway, next time I’ll check your pipes haven’t frozen when you’re out of town. If you call the police when you see someone scratching my car, I will keep an eye on your kid as he waits for the school bus in the morning. On the other hand, if you “defect,” or break the cooperative bond, I will withdraw my favours. No Christmas party invites, plant watering or neighbourhood watch for you. Ideally this will teach you a lesson, changing how you treat me the next time.

But tit-for-tat only explains so much. Recent research by one of us has showed how cooperation is fostered by a different means, one that has profound implications for how the US should think about housing. Nearly 800 people were recruited online to participate in a set of experiments that lasted for several rounds. People were placed into social networks of random structure and interacted anonymously. In each round, the subjects could cooperate or defect with the people to whom they were connected. In addition, and crucially, in some experimental conditions, subjects could make or break ties to other participants. We found that humans kept cooperation alive in groups by actively rewiring their social networks. This is more complicated than simple tit-for-tat: people don’t just punish non-cooperators by reciprocating kind or unkind behavior, they also sever ties to non-cooperators, and isolate them, leaving them to hang out only with other selfish people. It’s a form of ostracism.

It sounds simple enough. But this strategy only works, we found, if people can rewire their networks fast enough. If people are stuck being connected to non-cooperators, and if they cannot cut the ties quickly, they shift to non-cooperation themselves, and the group to which they belong, which might earlier have been altruistic, devolves into an acrimonious, selfish mess.

This finding has important implications for housing. Well-intentioned policies designed to give people a stake in their homes, or otherwise keep them tied to a particular place, may have an unintended downside. On the one hand, people might feel more invested in their community, and be more motivated to keep it clean and safe. On the other hand, it takes time and money to sell a house. So, if a community contains deadbeats, and people are locked into it with no easy way to relocate, they soon stop being nice themselves.

In fact, in a real-life experiment, called “Moving to Opportunity” and sponsored by HUD in the 1990’s, nearly 5,000 people were randomly assigned to get vouchers that would allow them to leave high-poverty areas if they wanted. While the experiment did not measure cooperation, it did document meaningful health benefits of allowing people the ability to move: for example, those that had the opportunity wound up having less depression years later.

People’s desire to move into and out of communities as the communities cycle through decline and restoration is also apparent, as documented in the work of sociologists like William Julius Wilson, who highlight both the costs and benefits of such change. Even Detroit, where the population has shrunk by 25% in the last ten years, is beginning to add young and educated people, who are moving back in.

But by making it hard for people to get up and move, and to rewire their social networks and re-shape their communities, we make it hard for them to create viable, cooperative, and supportive neighbourhoods. And we give the anti-social types easy, and defenceless, targets.

In fact, by making it easier for people to move, individual households not only fare better themselves, they also increase the overall welfare of the entire population. Yes, the deadbeats are stuck on their own, perhaps in a downward spiralling community. But the majority of people fares better when mobility is made easy. And deadbeats find it harder to exploit other deadbeats.

Freedom of association is important, it turns out, to optimize human society – just as the founding fathers realized.

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About ErikaChristakis

Yale Lecturer in early childhood education/Licensed teacher/Former preschool director/author. In possession of: unmarketable bachelor’s degree (Harvard, anthropology), semi-marketable graduate degrees (public health, education…). Rewarding career at the intersection of family, society, and schools (including long stint in parenting vortex). Forging a new path to connect all of the above.

One Response to Leave the Deadbeats Behind

But you do not mention that house ownership also increases investment in the maintenance of the housing stock and provides for a form of state-incentivized savings for retirement (the kind of thing which is possibly about to be ruled illegal by the Supreme Court, I’ll grant you ;).

In any case this is a bit of a strange argument: how many deadbeats are there, and is their incidence (initially) endogenous or exogenous? What may come out of a simple game may not be, and in this case would seem to me unlikely to be, the general equilibrium. Mobility has touted economic benefits and although it is not clear to what extent this is only because certain costs are mutualized and internalized, it would seem a more important reason to try to avoid negative equity.

In the end negative equity can best be avoided by sound lending policies and proper oversight of the mortgage market. With such measures in place, it seems to me that the immobility trap would anyway become a much less significant phenomenon.